Federal Student Loan Consolidation

A student loan consolidation takes the borrowers loans and combines all the loans into one new loan with one lender, and one weighted average interest rate. This removes the burden from the borrower of trying to keep track of many different loans, with different lenders, balances, and interest rates. Consolidation programs exist for both federal and private student loans, but the purpose of this page is to discuss federal student loan consolidations. For more information of private student loans, click here.

The Direct Loan program now has a $1 trillion dollar balance, with a yearly increase in the hundreds of billions of dollars being lent to students.

Benefits of the Consolidation

There are quite a few good reasons to consider consolidating your federal student loans. Understanding all the benefits will help you make a good financial decision. Here is an overview of some of the many benefits:

Having only one federal loan under your name, with one lender, and one interest rate will greatly simplify your student loans. You will be able to track this student loan balance on one monthly bill. No more paying many bills to many lenders, and not knowing the combined balance of all your loans on one single statement.

Consolidation offers flexible repayment plans. You can enter into a payment plan that fits your needs, with payments even as low as $0.00 per month depending on your income and family size. This is not a deferment or forbearance, its an actual payment of $0.00 per month if your income is so low that the government says you cannot afford to make payments. Payment plans are also not written in stone as with a normal loan. If for example you are currently able to make your payments without a problem, but in the future lose part of your income, you will be able to change your repayment plan with no other adjustments to your loans being necessary. This offers the borrower to have flexibility with the monthly payment, and not fall into default when unemployed, or earning less than what he or she is able to pay the most necessities with.

Consolidation also takes any defaulted loans you have out of default and puts them into good standing with a fresh start. This gives the borrower a second chance, combined with the flexible repayment plans it makes falling back into default difficult unless the borrower is not pro-active with the loans, and takes an “I do not care” attitude towards them.

Interest on the loan is exactly what your current interest is on all your loans. This means you do not have to worry about the interest rate, no negotiating, no hassle.

Reasons To Not Consolidate.

Consolidation may not be the best option for everyone. What is the most important is to become educated about your loans, what programs exist to help you, and then to take action on what you determine to be the best for your particular situation?

Here are some reasons you may want to consider not consolidating your loans:

Consolidation will in some cases extend the life of your loan. If you can afford your payment and want to get the loan paid off as fast as possible, consolidation may not be for you.

When your loans are consolidated, they are converted into Direct Loans. At that time, you will lose any benefits of your old loans, but gain the benefits of the Direct Loans.

Weighted Average Interest Rate

The Direct Loan Consolidation program uses a weighted average interest rate to calculate your new interest rate in the consolidation rounded up to the nearest one-eighth of 1%. This method takes the average weight(balance) of your loans as compared with the interest rate to give you a new fair interest rate.

Example: Borrower has a balance of $100,000 on their federal student loans that is split into two different loans. One loan is $25,000 @ 6.5% interest, the second loan is $75,000 @ 3.5% interest. Because the loan with a $25k balance makes up 25% of the borrowers balance, they would multiple 25% x 6.5% = 1.625%. Next, the remaining $75k balance makes up 75% of the borrowers total balance, so they would multiple 75% x 3.5% = 2.625%. The Department of Education would then combined those two numbers to come up with the weighted average interest rate of 1.625% + 2.625% = 4.25%.

As you can see from this example, the borrower had not one but two interest rates which have now been combined into one interest rate that takes the balance(s) of the loan into consideration when calculating the new and fair weighted average interest rate.

How Long Does It Take To Consolidate

The length of time required to complete the consolidation depends largely on the borrower and the federal servicer. Once the borrower has signed all the necessary paperwork and has submitted it to the lender, it typically takes between 30-60 days for the loans to be consolidated and paid off.

Loans That Are Eligible For Consolidation

Only federal student loans are eligible for this consolidation; private loans are excluded entirely. The loan types which qualify for a consolidation are:

Only federal student loans are eligible for this consolidation

Direct Subsidized

Direct Unsubsidized

Federal Perkins Loans

Plus Loans

Stafford Unsubsidized

Stafford Subsidized

Supplemental Loans for Students(SLS)

Federal Nursing Loans

Health Education Assistance Loans

FFEL Loans (must be consolidated with another loan, or applying for PSLF)

When Can I Apply For Consolidation?

Generally, you can apply for a consolidation once you have graduated from school, or have left school, or have dropped below 6 credits per semester. Your student loans would need to show that they are not in “FULL TIME” status, and must be in repayment. There is no cost to applying for a consolidation if you plan on applying on your own through the Department of Education. If on the other hand you need assistance and would like someone to assist you through the consolidation process, please call 844-669-4407.

Disclaimer

This site does not negotiate, adjust or settle debts. All federal student borrowers are able and encouraged to apply for any federal repayment or forgiveness programs through the US Department of Education for free without paying fees to any entity. Nothing on this site constitutes official qualification or guarantee of result. All telephone numbers listed connect to 3rd party private companies not controlled by Student Debt Relief offering fee-based services to assist with application preparation for federal student loan and other programs.

Of course, we start with President-Elect Donald Trump
Every week, Student Debt Relief posts a roundup of the latest happenings in all things related to student loan debt. This week offers four articles, each covering a … MORE+

With the 2016 Presidential Election just days away, we’ve gotten to hear from both candidates about their plans to combat the growing problem of student loan debt. And despite the fact that we are not personally … MORE+

Weekly Roundup - Every week, Student Debt Relief posts a roundup of the latest happenings in all things related to student loan debt. This week offers three articles, each covering a different aspect of student loans.
Our … MORE+

There are no obligations or commitments. YOUR ASSESSMENT IS ABSOLUTELY FREE
Call 1-844-669-4407 today to go over your options.

Please note: Only the US Department of Education can provide determination of eligibility and exact payment amount for any government forgiveness or repayment program listed on this website. Also, all forgiveness and re-payment programs may be applied to for free without paying anyone for assistance through the US Department of Education. Our calculators, estimators and eligibility tools are strictly to help consumers understand potential options estimate potential payments and do not provide any guarantee of enrollment, qualification, or payment amount for ANY programs.